OIL IN ANGOLA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001600030145-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 11
• Document Creation Date: December 22, 2016
• Document Release Date: October 28, 2011
• Sequence Number: 145
• Publication Date: October 1, 1970
• Content Type: IM

 Declassified in Part - Sanitized Copy Approved for Release 2011/10/31 : CIA-RDP85T00875R001600030145-8
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DIRECTORATE OF
INTELLIGENCE
Intelligence; Memorandum
Oil In Angola
ER IM 70-144
October 1970
Copy No.
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WARNING
This document contains information affecting the national
defense of the United States, within the meaning of Title
18, sections 793 and 794, of the US Code, as amended.
Its transmission or revelation of its contents to or re-
ceipt by in unauthorized person is prohibited by law.
GROUP I
EetluJnd from out- ?
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deda~~iR~olion
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
October 1970
INTELLIGENCE MEMORANDUM
Oil In Angola
Introduction
Oil production in Angola has reached a substan-
tial scale. After years of exploration, the US
Gulf Oil Corporation discovered relatively large
reserves of oil in the Cabinda District, and pro-
duction now is about 100,000 barrels per day. This
memorandum describes the development of Angola's
petroleum industry and assesses its benefits to
Angola and Portugal.
Background
1. The discovery and development of major oil
deposits in Angola is giving the Portuguese province
an important new export. In 1969, exports totaled
about $300 million, of which coffee contributed more
than $100 million; diamonds, the leading mineral
export, about $56 million; and iron ore about $38
million. While crude oil exports that year were
only about $15 million, by 1972 they probably will
total about $100 million, vying with coffee for
first place.
2. The search for oil began in the 1920s, but
commercially exploitable quantities were not found
until 1955, when discoveries were made near Luanda,
Note: This memorandum was produoed solely by CIA.
It was prepared by the Office of Economic Research
and was coordinated with the Office of Current
InteZZigenc. .
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Angola's capital. Production from the Luanda wells
increased steadily, reaching more than 18,000 barrels
per day (b/d) in 1964, but then dropped sharply to
11,000 b/d by 1967 because of technical difficulties.
Angola had been self-sufficient in crude oil since
the early 1960s, except In 1967 when the territory
was forced to import a little oil to meet its re-
quirements of about 13,000 b/d.
3. Gulf's offshore wells at Cabinda* came into
production in 1968, and Angola's crude output
averaged almost 50,000 b/d in 1969, providing sizable
exports for the first time. Estimated production in
1970 will average 100,000 b/d, of which about
80,000 b/d will be available for export (see Figure 1).
Angola: Crude Oil Production
Barrels
per day
100,000
* Although physically separated from Angola,
Cabinda is one of the province's districts and
is administered from Luanda. .
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65 68 87 88 69 1e7(
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SEGRE'I'
Tho Oil Industry
4. Although a number of firms have applied for
exploration concessions, only a few companies are
active at present. The Belgian firm, Petrofina,
the first, to strike oil near Luanda in 1955, joined
with Portuguese private interests to form Petrangol,
which controls the oil concessions around Luanda
and is the only producing company in Angola other
than Gulf. Petrangol also shares two additional
concessions near the mouth of the Congo River with
Angol, a Portuguese firm, and the US-based Texaco.
Petrangol began drilling at this site in 1969, and
Texaco's operations probably now are under way,
Exploration and drilling by Angol, both in associa-
tion with Petrangol in the Western Cuanza Basin and
inner Congo Basin zones as well as in its own con-
cessions covering the Ambriz, Eastern Cuanza, and
outer Congo areas are progressing at a good pace.
Exploratory work also is in progress at two con-
cessions held by the French firm Compagnie Frangaise
de Petroles (CFP) and Angol (see Figure 2).
5. The most important oil discoveries have
been made by Cabinda Gulf oil, a subsidiary of the
US Gulf Oil Corporation in the Cabinda District of
Angola. After eight years of unsuccessful onshore
exploration, the company turned to offshore drilling
in 1966, and later that year discovered reserves
estimated at 2 b 11".un barrels of low sulfur oil
(see Figure 2). Production began late in 1968 at
a rate of 30,000 b/d and was to reach 150,000 b/d
in two years.*
6. Gulf has had problems. Although production
began as planned, difficulties were encountered with
the oil's heavy wax content and at times with exces-
sive salt. Moreover, inadequate storage facilities
have forced cutbacks in pumping pending arrival of
tankers. Despite these setbacks, production con-
tinued to rise until in March 1970 it reached the
level of 100,000 b/d. Production dropped to about
* Cabinda Oil's facilities include several
gathering stations, which pump the crude oil
through a 20-inch pipe to five storage tanks with
a total capacity of 1,370,000 barrels. The tanks
are located on a bluff overlooking the shore at
Cabinda, and the oil is gravity fed through a 36-
inch pipeline to tankers up to 100,J)O0 tons anchored
some 8.5 miles offshore.
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ATLANTIC
'' OCEAN ;:
ANGOLA
Petroleum Concessions
1969
GULF
ANGOL?PETNANOOL?TEXACO
Q ANOOL?PETRANGOL
ANOOL?TEXACO
Q ANGOL?CFP
- PETRANGOL
76 00 75 MILES
'
0 75 p0 761fILOME7EH5
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0 N G,'0`
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90
iij
and
195
13
als
cee
lit
iro hav ser majo bein
to C
g ann
n
e
vices
r
g written off. These tax advantages should end
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by 1971, however, and Angola's receipts are expected
to increase significantly in that year. When Gulf's
Cabinda output reaches its anticipated level of
150,000 b/d, the company's tax, royalty, and annual
rent payments to Angola -- based on posted prie of
$1.59 per barrel -- could approximate some $44 mil-
lion, equivalent to about 14% of the government's
expenditures for 1970. Revenues from other oil
companies, as well as from possible increased pro-
duction from Gulf's future operations, naturally
would boost Angola's receipts even more.
10. Angola customarily has a balance-of-payments
deficit, which in 1968 totaled $29.9 million (see
the table). In that year, the customary surplus in
its accounts with ccuntries outside the Escudo
Monetary Zone* was about $40.5 million, but this
surplus was more than offset by the usual deficit
with the.Escudo Zone, which totaled $70.4 million.
The largest deficit occurs in the trade account
with the Escudo Zone and is caused primarily by
heavy imports from Portugal. Angola's foreign
exchange earnings from the oil industry should total
about $50 million annually in 1972, which would
create a favorable balance of payments if not drained
off by increases in imports and other transactions.
11. Portugal clearly will also gain from
Angola's oil industry earnings. As with other
Escudo Monetary Gone members, Angola's foreign
transactions and currency are managed by Metro-
politan monetary authorities, and all of Angola's
foreign exchange is held in Portugal. By con-
trolling Angola's imports from countries outside
the Escudo Monetary Zone and by treating Angola
as a captive market for Portuguese exports, Lisbon
can determine the province's foreign exchange ex-
penditures. Also, Portugal. can insist that Angola
assume a large part of its development and defense
costs. Portugal can be expected to take advantage
of some or all of these options. Lisbon announced
some time ago that the territory's own participa-
tion in its development and defense expenditures
would be increased greatly during the Portuguese
* Compri-s-e-d -of Portugal and its overseas provinces,
the Escudo Monetary Zone has a centralized develop-
ment plan, a common currency (the'Escudo) and pay-
ments system, a. quasi common market, and a well-
integrated credit system.
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Angola's Balance of Payments
1968
Million US $
Escudo Zone
Outside
Escudo Zone Total
Merchandise
-53.9
18.8
-35.1
Travel
-12.8
-1.0
-13.8
Transportation
-8.8
11.9
3.1
Insurance
-1.0
0.1
-0.9
Income on invest-
ments
-15.2
-3.4
-18.6
Government
25.7
-0.2
25.5
Miscellaneous
services
-3.2
8.9
5.7
Private transfers
-12.2
-0.5
-12.7
J ,:ivate capital
9.6
5.9
15.5
Public capital
1.4
0
1.4
-70.4
40.5
-29.9
Third Plan (1968-73). Consequently, revenues from
oil can be expected to be used to substitute for
some of Portugal's expenditures in Angola, which
are now about $110 million per year -- $30 million
in economic assistance and some $80 million in
military assistance.
12. Portugal also will benefit from having its
own source of crude oil. Under existing arrange-
ments with the oil companies, Portugal has the
option of purchasing about 37% of Angola's oil.
The territory could meet the Metropole's current
consumption requirements of 75,000 b/d in the near
future and even immediately if the 37% limit were
raised.
13. The Angolan people -- even those in Cabinda -
are not likely to benefit much from the oil ' d
at least for a few years. Most of the 1,500 workers
hired to build Gulf's facilities have since been
laid off, and the economic boom in Cabinda that
accompanied the construction activity has waned.
The. oil industry is a small employer, and most of
the skilled positions have been filled w4-
1
Americans
or European Portuguese. Few blacks are being trained
7:
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to handle technical jobs. Expenditures: by foreigners
in Cabinda will benefit some of the local merchants,
but a large portion of the consumer goods required by
the oil workers still can be supplied only by imports.
Conclusions
14. Oil production from the newly developed
fields off the Cabinda coast has reached 100,000 b/d
and will probably greatly exceed this level in the
future? Within a few years, oil will become Angola's
largest export by far and a major source of government
income. It is likely, however, that these earnin,,s
will be used more to defray Portugal's expenses in
Angola than to accelerate the area's economic
development.
8,
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